The forthcoming Middle East negotiations: the Russian tactics exposed

Russian state-managed media has portrayed the recent telephone conversation between President Vladimir Putin and US President Donald Trump on 18 March 18 2025 as a significant diplomatic victory for Moscow. Russian news outlets emphasised that the call, initiated by President Trump, reflects Russia’s restored prominence on the global stage. 

According to US sources, during the call, both leaders agreed to a 30-day ceasefire focusing on halting attacks on energy infrastructure in Ukraine. However Ukrainian reports indicate that Russian forces violated this agreement shortly after its announcement, targeting Ukrainian energy facilities. 

In addition to the ceasefire, Russian media highlighted President Putin’s proposal for economic collaboration with the United States, particularly in the development of rare earth metals and aluminium production. Russia, possessing the world’s fifth-largest reserves of rare earth metals, seeks to partner with US companies to exploit these resources. 

Looking ahead, Russian media reports that two parallel sets of discussions are scheduled in the Middle East on Sunday: one addressing the conflict in Ukraine and another focusing on US-Russia relations. In the latter discussions, Russia is expected to advocate for the relaxation of US sanctions and promote investment opportunities for American companies in Russian real estate and mineral sectors.

This strategy may aim to influence the US stance in the Ukraine-Russia negotiations by intertwining economic incentives with diplomatic objectives. However potential US investors should exercise caution due to several factors:

• European Sanctions: Ongoing European sanctions against Russia could complicate any US investments, especially if they contradict allied policies. Those sanctions target companies doing business in Russia, so multinational companies might find themselves the subject of European sanctions, particularly in the banking sector, if they invest in Russia at the current time.

• Flight Restrictions: The ban on Western flights into Russia adds logistical challenges and signifies broader geopolitical tensions. There are no current flights operating from either the United States or European countries (except Serbia and Turkey) to Russia, which would make travel for US executives involved in US-Russia deals extremely difficult.

• Legal Uncertainties: Concerns about the rule of law in Russia, including property rights and contract enforcement, pose significant risks to foreign investors. These risks go back to the 1990's, and the Russian banking crash of 1998, when western banks lost huge amounts of money when their Russian counterparts defaulted on their loans and there was nothing in effect that the banks or western investors could do about it, given that Russian courts will not respect foreign court judgments, particulary those from western countries or western arbitration tribunals.

• Geopolitical Risks: Investments in Russia might become leverage points, subject to increased scrutiny or sanctions, particularly if the conflict in Ukraine persists or escalates. In other words, US investments might be hampered by malicious actions of the Russian government as part of a regime of political pressure on the United States, significantly weakening future US bargaining power.

President Trump himself faced huge problems as a businessman in establishing a Trump Tower in Moscow, a project first raised as a possibility during Trump's visit to Moscow in 1987 but eventually being abandoned in 2016 after myriad technical complications with Russian regulations and the exposure of Russian hacking and attempts to influence the US elections. In summary, US investments in Russia risk significant regulatory and public relations risks, due to the unpredictable and often hostile nature of Russian foreign policy and illegal electronic communications activities.

European allies have expressed apprehension regarding any US-brokered ceasefire that pressures Ukraine into concessions. Actions facilitating US investments in Russia could strain transatlantic relations and undermine the unified stance against Russian aggression. 

Historically, US investments in Russia have faced challenges. For instance, previous endeavours, such as proposed real estate projects, encountered legal and political obstacles, highlighting the complexities of doing business in Russia.

Given the current geopolitical climate, private US investors may be hesitant to engage in Russian ventures. It is imperative that US negotiators remain vigilant, recognising the potential pitfalls of Russian diplomatic overtures and ensuring that economic engagements do not compromise broader strategic objectives. On the other hand, it is also possible that US negotiators are fully aware of all these risks and are playing Putin at his own game, engaging in negotiations that will prove ultimately fruitless just as President Putin seems to wish to engage in negotiations over Ukraine that achieve nothing. Rather Putin is just testing the West's hand, seeing what concrete steps the United States and Europe are actually prepared to take to coerce Russia into a ceasefire in Ukraine.

In working with Russia, only actions tend to have any effects; diplomacy is of limited effect. Russian political dynamics work on the basis of power prevailing, rather than the sorts of predictable and stable legal and political frameworks necessary for large-scale investments. Russian law and politics have become increasingly totalitarian in recent years, particularly after the second Russian invasion of Ukraine, and it is not clear how any western investor in Russia could fail to be deterred by the current investment climate in Russia.